Question 1

In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods. This would be an example of

Accepted Answer

A)  the fast-second strategy.
B)  the inverted-U theory.
C)  creative destruction.
D)  venture capital.E) A) and B)
F) A) and C)

Question 2

Product innovation will be successful only if it makes the product's

Accepted Answer

A)  marginal utility increase.
B)  price decrease.
C)  marginal-utility-to-price ratio increase.
D)  marginal-utility-to-price ratio decrease.E) B) and C)
F) A) and B)

Question 3

A patent on a new product benefits the firm securing it by

Accepted Answer

A)  limiting the direct imitation of the product by rivals for many years.
B)  enabling the firm to retain "trade secrets" about the product.
C)  reducing the firm's legal expenses.
D)  increasing the speed of diffusion of the new product.E) A) and B)
F) All of the above

Question 4

As it relates to R&D, the expected-rate-of-return curve, r,

Accepted Answer

A)  usually slopes upward.
B)  shows the cost of financing various levels of R&D.
C)  varies in location depending on the location of the interest-rate cost-of-funds curve, i.
D)  represents the marginal benefit element in the MB = MC decision framework.E) B) and C)
F) A) and B)

Question 5

The reason that innovation promotes competition is because

Accepted Answer

A)  innovative firms can charge any price they want for a new product.
B)  it lowers the research and development costs for innovative firms.
C)  firms use it to make competitors' products obsolete in the market.
D)  government provides patent protection for innovation that lasts for a long time.E) A) and B)
F) A) and C)

Question 6

The marginal benefit to a firm from its R&D expenditures is depicted by its

Accepted Answer

A)  interest-rate cost-of-funds curve.
B)  expected-rate-of-return curve.
C)  venture capital acquisition curve.
D)  retained earnings payout curve.E) A) and B)
F) A) and C)

Question 7

Products that incorporate thousands of different technologies into a single product

Accepted Answer

A)  are most susceptible to patent infringement lawsuits that can halt production.	
B)  are an effective way to thwart patent trolls.
C)  are protected by Federal Government "meta-patent" policies.
D)  are not subject to patent law because of "fair use" antitrust regulations.E) A) and C)
F) None of the above

Question 8

Refer to the data. At $100 million of R&D expenditures, the

Accepted Answer

A)  marginal cost of R&D exceeds the marginal benefit.
B)  marginal benefit of R&D exceeds the marginal cost.
C)  expected rate of return from R&D is negative.
D)  firm has exceeded its affordable level of R&D.E) B) and C)
F) A) and B)

Question 9

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Accepted Answer

A)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent.
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
C)  undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent.
D)  undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.E) All of the above
F) B) and C)

Question 10

Describe the legal protections and potential advantages of taking the lead in innovation.

Accepted Answer

The legal protections are that some tech...

Question 11

Refer to the data for a utility-maximizing consumer whose income = $4. Assume that new product Z doesn't exist. How many units of X and Y will this consumer buy, given his or her $4 budget?

Accepted Answer

A)  1 of X and 3 of Y
B)  3 of X and 1 of Y
C)  2 of X and 2 of Y
D)  0 of X and 4 of YE) None of the above
F) B) and D)

Question 12

Approximately what percentage of research and development spending by businesses in the United States in 2016 went to development (innovation and imitation) and about what percentage went to basic and applied research and invention, respectively?

Accepted Answer

A)  20, 80
B)  40, 60
C)  80, 20
D)  60, 40E) A) and B)
F) A) and C)

Question 13

The modern view of technological advance is that it is an external force to which the economy adjusts.

Accepted Answer

A) True 
 B)False

Question 14

Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that

Accepted Answer

A)  oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products.
B)  the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D.
C)  entry barriers enable oligopolists to sustain the profits they gain from innovation.
D)  the large size of oligopolists' R&D departments allows them to use very specialized, expensive R&D equipment and employ teams of specialized researchers.E) None of the above
F) All of the above

Question 15

The legal protection that gives the original innovators of products the exclusive right to use a particular product name is a

Accepted Answer

A)  patent.
B)  copyright.
C)  brand name.
D)  trademark.E) C) and D)
F) All of the above

Question 16

What does it mean that "innovators try to anticipate the future"? What are the economics consequences of this effort?

Accepted Answer

Those with strong anticipatory ability a...

Question 17

The outcomes from R&D expenditures by firms are

Accepted Answer

A)  always profitable for the firms, if they have the funds available.
B)  the most costly use of funds by the firm.
C)  subject to economies of scale.
D)  expected, but not guaranteed.E) B) and D)
F) None of the above

Question 18

For a new product to be profitable, it must

Accepted Answer

A)  enable customers to obtain greater total utility from their money income.
B)  be less expensive than existing substitute products.
C)  have greater marginal utility than existing substitute products.
D)  embody process innovation.E) A) and B)
F) A) and C)

Question 19

An amount of R&D spending that is greater than the optimal amount indicates that the

Accepted Answer

A)  marginal benefit of R&D expenditures is equal to the marginal cost.
B)  marginal benefit of R&D expenditures is greater than the marginal cost.
C)  interest-rate cost-of-funds is less than the expected rate of return.
D)  interest-rate cost-of-funds is greater than the expected rate of return.E) B) and D)
F) B) and C)

Question 20

Technological advance improves allocative efficiency by

Accepted Answer

A)  enhancing monopoly power.
B)  reducing income inequality.
C)  giving society a more-preferred mix of goods and services.
D)  encouraging saving.E) C) and D)
F) B) and C)

Exam 15: Technology, RD, and Efficiency

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Correct AnswerverifiedShow Answer

As it relates to R&D, the expected-rate-of-return curve, r,

Correct AnswerverifiedShow Answer

In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods. This would be an example of

Correct AnswerverifiedShow Answer

Refer to the data for a utility-maximizing consumer whose income = $4. Assume that new product Z doesn't exist. How many units of X and Y will this consumer buy, given his or her $4 budget?

Correct AnswerverifiedShow Answer

Approximately what percentage of research and development spending by businesses in the United States in 2016 went to development (innovation and imitation) and about what percentage went to basic and applied research and invention, respectively?

Correct AnswerverifiedShow Answer

Describe the legal protections and potential advantages of taking the lead in innovation.

Correct AnswerverifiedThe legal protections are that some tech...View AnswerShow Answer

A patent on a new product benefits the firm securing it by

Correct AnswerverifiedShow Answer

What does it mean that "innovators try to anticipate the future"? What are the economics consequences of this effort?

Correct AnswerverifiedThose with strong anticipatory ability a...View AnswerShow Answer

The outcomes from R&D expenditures by firms are

Correct AnswerverifiedShow Answer

Refer to the data. At $100 million of R&D expenditures, the

Correct AnswerverifiedShow Answer

The marginal benefit to a firm from its R&D expenditures is depicted by its

Correct AnswerverifiedShow Answer

Technological advance improves allocative efficiency by

Correct AnswerverifiedShow Answer

For a new product to be profitable, it must

Correct AnswerverifiedShow Answer

The legal protection that gives the original innovators of products the exclusive right to use a particular product name is a

Correct AnswerverifiedShow Answer

An amount of R&D spending that is greater than the optimal amount indicates that the

Correct AnswerverifiedShow Answer

Products that incorporate thousands of different technologies into a single product

Correct AnswerverifiedShow Answer

Product innovation will be successful only if it makes the product's

Correct AnswerverifiedShow Answer

The reason that innovation promotes competition is because

Correct AnswerverifiedShow Answer

Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that

Correct AnswerverifiedShow Answer

The modern view of technological advance is that it is an external force to which the economy adjusts.

Correct AnswerverifiedShow Answer

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The legal protections are that some tech...
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Those with strong anticipatory ability a...
View Answer

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